What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-03 · 186 added, 127 removed, 576 unchanged (35% of the section changed)

2 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

9 unchanged sentences

Total other operating costs and expenses 97 186 228 493

Equity in earnings of operating affiliate 7 28 24 54

Equity in (losses) earnings of operating affiliate ( 36 ) 20 ( 12 ) 74

Operating earnings 244 750 1,804 4,186

19 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

1 unchanged sentence

Net earnings $ 230 $ 538 $ 1,486 $ 2,928

Other comprehensive income (loss):

Other comprehensive (loss) income:

Foreign currency translation adjustment—net of taxes ( 27 ) ( 9 ) 3 ( 49 )

7 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

2023 December 31,

49 unchanged sentences

(in millions, except per share amounts)

Balance as of March 31, 2023 $ 2 $ ( 97 ) $ 1,424 $ 4,348 $ ( 224 ) $ 5,453 $ 2,637 $ 8,090

Balance as of June 30, 2023 $ 2 $ ( 226 ) $ 1,430 $ 4,797 $ ( 199 ) $ 5,804 $ 2,716 $ 8,520

Net earnings — — — 164 — 164 66 230

Other comprehensive income — — — — 25 25 — 25

Other comprehensive loss — — — — ( 26 ) ( 26 ) — ( 26 )

Purchases of treasury stock — ( 151 ) — — — ( 151 ) — ( 151 )

Issuance of $ 0.01 par value common stock under employee stock plans

— 2 ( 1 ) — — 1 — 1

Retirement of treasury stock — 226 ( 24 ) ( 202 ) — — — —

Stock-based compensation expense — — 10 — — 10 — 10

1 unchanged sentence

— — — ( 78 ) — ( 78 ) — ( 78 )

Balance as of June 30, 2023 $ 2 $ ( 226 ) $ 1,430 $ 4,797 $ ( 199 ) $ 5,804 $ 2,716 $ 8,520

Distribution declared to noncontrolling interest — — — — — — ( 204 ) ( 204 )

Balance as of September 30, 2023 $ 2 $ ( 151 ) $ 1,416 $ 4,681 $ ( 225 ) $ 5,723 $ 2,578 $ 8,301

Balance as of December 31, 2022 $ 2 $ — $ 1,412 $ 3,867 $ ( 230 ) $ 5,051 $ 2,802 $ 7,853

2 unchanged sentences

Purchases of treasury stock — ( 357 ) — — — ( 357 ) — ( 357 )

Retirement of treasury stock — 226 ( 24 ) ( 202 ) — — — —

Acquisition of treasury stock under employee stock plans — ( 22 ) — — — ( 22 ) — ( 22 )

4 unchanged sentences

— — — ( 235 ) — ( 235 ) — ( 235 )

Distribution declared to noncontrolling interest — — — — — — ( 255 ) ( 255 )

Balance as of June 30, 2023 $ 2 $ ( 226 ) $ 1,430 $ 4,797 $ ( 199 ) $ 5,804 $ 2,716 $ 8,520

Distributions declared to noncontrolling interest — — — — — — ( 459 ) ( 459 )

Balance as of September 30, 2023 $ 2 $ ( 151 ) $ 1,416 $ 4,681 $ ( 225 ) $ 5,723 $ 2,578 $ 8,301

CF INDUSTRIES HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

9 unchanged sentences

(in millions, except per share amounts)

Balance as of March 31, 2022 $ 2 $ ( 123 ) $ 1,482 $ 2,907 $ ( 266 ) $ 4,002 $ 2,751 $ 6,753

Balance as of June 30, 2022 $ 2 $ ( 331 ) $ 1,474 $ 3,729 $ ( 285 ) $ 4,589 $ 2,925 $ 7,514

Net earnings — — — 438 — 438 100 538

Other comprehensive loss — — — — ( 19 ) ( 19 ) — ( 19 )

Other comprehensive income — — — — 15 15 — 15

Purchases of treasury stock — ( 532 ) — — — ( 532 ) — ( 532 )

Retirement of treasury stock — 281 ( 23 ) ( 260 ) — ( 2 ) — ( 2 )

Issuance of $0.01 par value common stock under employee stock plans — — 4 — — 4 — 4

— 1 3 — — 4 — 4

Stock-based compensation expense — — 10 — — 10 — 10

Dividends and dividend equivalents ($ 0.40 per share)

— — — ( 83 ) — ( 83 ) — ( 83 )

Balance as of June 30, 2022 $ 2 $ ( 331 ) $ 1,474 $ 3,729 $ ( 285 ) $ 4,589 $ 2,925 $ 7,514

Cash dividends ($0.40 per share) — — — ( 80 ) — ( 80 ) — ( 80 )

Distribution declared to noncontrolling interest — — — — — — ( 372 ) ( 372 )

Balance as of September 30, 2022 $ 2 $ ( 863 ) $ 1,488 $ 4,087 $ ( 270 ) $ 4,444 $ 2,653 $ 7,097

Balance as of December 31, 2021 $ 2 $ ( 2 ) $ 1,375 $ 2,088 $ ( 257 ) $ 3,206 $ 2,830 $ 6,036

7 unchanged sentences

Stock-based compensation expense — — 32 — — 32 — 32

Dividends and dividend equivalents ($ 0.70 per share)

Cash dividends ($ 1.10 per share)

— — — ( 227 ) — ( 227 ) — ( 227 )

Distribution declared to noncontrolling interest — — — — — — ( 247 ) ( 247 )

Balance as of June 30, 2022 $ 2 $ ( 331 ) $ 1,474 $ 3,729 $ ( 285 ) $ 4,589 $ 2,925 $ 7,514

Distributions declared to noncontrolling interest — — — — — — ( 619 ) ( 619 )

Balance as of September 30, 2022 $ 2 $ ( 863 ) $ 1,488 $ 4,087 $ ( 270 ) $ 4,444 $ 2,653 $ 7,097

See accompanying Notes to Unaudited Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended

Nine months ended

September 30,

(in millions)

7 unchanged sentences

Unrealized net gain on natural gas derivatives ( 65 ) ( 39 )

Impairment of equity method investment in PLNL 43 —

long-lived and intangible asset impairment — 239

Pension settlement loss — 24

Gain on sale of emission credits ( 39 ) ( 6 )

59 unchanged sentences

See Note 16—Segment Disclosures for the revenue of each of our reportable segments, which are Ammonia, Granular Urea, UAN, AN and Other.

The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three and six months ended June 30, 2023 and 2022:

The following table summarizes our revenue by product and by geography (based on destination of our shipment) for the three and nine months ended September 30, 2023 and 2022:

Ammonia Granular Urea UAN AN Other Total

(in millions)

Three months ended June 30, 2023

Three months ended September 30, 2023

North America $ 165 $ 340 $ 330 $ 50 $ 111 $ 996

1 unchanged sentence

Total revenue $ 235 $ 360 $ 435 $ 114 $ 129 $ 1,273

Three months ended June 30, 2022

Three months ended September 30, 2022

North America $ 367 $ 571 $ 531 $ 70 $ 132 $ 1,671

1 unchanged sentence

Total revenue $ 531 $ 689 $ 736 $ 180 $ 185 $ 2,321

Six months ended June 30, 2023

Nine months ended September 30, 2023

North America $ 955 $ 1,375 $ 1,312 $ 189 $ 357 $ 4,188

1 unchanged sentence

Total revenue $ 1,184 $ 1,431 $ 1,650 $ 377 $ 418 $ 5,060

Six months ended June 30, 2022

Nine months ended September 30, 2022

North America $ 1,937 $ 2,123 $ 2,421 $ 229 $ 465 $ 7,175

1 unchanged sentence

Total revenue $ 2,286 $ 2,287 $ 2,727 $ 656 $ 622 $ 8,578

As of June 30, 2023 and December 31, 2022, we had $ 9 million and $ 229 million, respectively, in customer advances on our consolidated balance sheets.

During the six months ended June 30, 2023 and 2022, substantially all of the customer advances at the beginning of each respective period were recognized as revenue.

As of September 30, 2023 and December 31, 2022, we had $ 282 million and $ 229 million, respectively, in customer advances on our consolidated balance sheets.

During the nine months ended September 30, 2023 and 2022, substantially all of the customer advances at the beginning of each respective period were recognized as revenue.

We offer cash incentives to certain customers generally based on the volume of their purchases over the fertilizer year ending June 30.

Our cash incentives do not provide an option to the customer for additional product.

The balances of customer incentives accrued as of June 30, 2023 and December 31, 2022 were not material.

The balances of customer incentives accrued as of September 30, 2023 and December 31, 2022 were not material.

We have certain customer contracts with performance obligations under which, if the customer does not take the required amount of product specified in the contract, then the customer is required to make a payment to us, the amount of which payment may vary based upon the terms and conditions of the applicable contract.

As of June 30, 2023, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts were approximately $ 845 million.

As of September 30, 2023, excluding contracts with original durations of less than one year, and based on the minimum product tonnage to be sold and current market price estimates, our remaining performance obligations under these contracts were approximately $ 910 million.

We expect to recognize approximately 14 % of these performance obligations as revenue in the remainder of 2023, approximately 52 % as revenue during 2024-2026, approximately 15 % as revenue during 2027-2029, and the remainder thereafter.

Subject to the terms and conditions of the applicable contracts, if the customers do not satisfy their purchase obligations under such contracts, the minimum amount that they would be required to pay to us under such contracts, in the aggregate, was approximately $ 255 million as of June 30, 2023.

Other than the performance obligations described above, we expect that any performance obligations under our customer contracts that were unfulfilled or partially fulfilled at December 31, 2022 will be satisfied in 2023.

3 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

11 unchanged sentences

In the computation of diluted earnings per common share, potentially dilutive stock-based awards are excluded if the effect of their inclusion is anti-dilutive.

Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were zero in both the three and six months ended June 30, 2023 and the three and six months ended June 30, 2022.

Shares for anti-dilutive stock-based awards not included in the computation of diluted earnings per common share were zero in both the three and nine months ended September 30, 2023 and the three and nine months ended September 30, 2022.

Inventories consist of the following:

September 30,

2023 December 31,

23 unchanged sentences

operations restructuring line item in our consolidated statements of operations, related to contractual and statutory obligations due to employees whose employment would be terminated in the proposed plan.

In August 2022, the final restructuring plan was approved, and decommissioning activities at our Ince facility were initiated.

As of June 30, 2023, the decommissioning of our Ince facility and other approved restructuring actions have been completed.

In August 2022, the final restructuring plan for our U.K.

operations was approved, and decommissioning activities at our Ince facility were initiated.

As a result, in the third quarter of 2022, we incurred additional charges related to our U.K.

restructuring of $ 8 million, primarily related to one-time termination benefits, which are included in the U.K.

operations restructuring line item in our consolidated statement of operations.

As of June 30, 2023, the decommissioning of our Ince facility and other approved restructuring actions had been completed.

In the third quarter of 2022, the United Kingdom continued to experience extremely high and volatile natural gas prices.

Russian natural gas pipeline flows to Europe via the Nord Stream 1 pipeline ceased, causing the United Kingdom to experience unprecedented natural gas prices.

In addition, the European Union announced a desire to cap the price that Europe would pay Russia for natural gas deliveries, further contributing to the uncertainty in European energy markets.

Given these factors and the lack of a corresponding increase in global nitrogen product market prices, in September 2022, we idled ammonia production at our Billingham complex.

As a result, we concluded that an additional impairment test was triggered for the asset groups that comprise the continuing U.K.

The results of our impairment test indicated that the carrying values for our U.K.

Ammonia and U.K.

AN asset groups exceeded the undiscounted estimated future cash flows.

As a result, we recognized asset impairment charges of $ 87 million, primarily related to property, plant and equipment and definite-lived intangible assets, which are included in the U.K.

long-lived and intangible asset impairment line item in our consolidated statement of operations.

In July 2023, we approved and announced our proposed plan to permanently close the Billingham ammonia plant, and, in September 2023, the final plan was approved.

As a result, in the third quarter of 2023, we recognized total charges of $ 5 million consisting primarily of the recognition of an asset retirement obligation and post-employment benefits related to contractual and statutory obligations due to employees whose employment would be terminated.

Property, Plant and Equipment—Net

Property, plant and equipment—net consists of the following:

September 30,

2023 December 31,

9 unchanged sentences

_______________________________________________________________________________

(1) As of June 30, 2023 and December 31, 2022, we had property, plant and equipment that was accrued but unpaid of approximately $ 63 million and $ 53 million, respectively.

As of June 30, 2022 and December 31, 2021, we had property, plant and equipment that was accrued but unpaid of approximately $ 51 million and $ 35 million, respectively.

Depreciation and amortization related to property, plant and equipment was $ 218 million and $ 422 million for the three and six months ended June 30, 2023, respectively, and $ 219 million and $ 424 million for the three and six months ended June 30, 2022, respectively.

(1) As of September 30, 2023 and December 31, 2022, we had property, plant and equipment that was accrued but unpaid of approximately $ 80 million and $ 53 million, respectively.

As of September 30, 2022 and December 31, 2021, we had property, plant and equipment that was accrued but unpaid of approximately $ 60 million and $ 35 million, respectively.

Depreciation and amortization related to property, plant and equipment was $ 211 million and $ 633 million for the three and nine months ended September 30, 2023, respectively, and $ 219 million and $ 643 million for the three and nine months ended September 30, 2022, respectively.

Plant turnarounds —Scheduled inspections, replacements and overhauls of plant machinery and equipment at our continuous process manufacturing facilities during a full plant shutdown are referred to as plant turnarounds.

The expenditures related to turnarounds are capitalized in property, plant and equipment when incurred.

CF INDUSTRIES HOLDINGS, INC.

Scheduled replacements and overhauls of plant machinery and equipment during a plant turnaround include the dismantling, repair or replacement and installation of various components including piping, valves, motors, turbines, pumps, compressors and heat exchangers and the replacement of catalysts when a full plant shutdown occurs.

1 unchanged sentence

Internal employee costs and overhead amounts are not considered turnaround costs and are not capitalized.

CF INDUSTRIES HOLDINGS, INC.

The following is a summary of capitalized plant turnaround costs:

Six months ended

Nine months ended

September 30,

(in millions)

4 unchanged sentences

operations — ( 21 )

Effect of exchange rate changes 1 ( 4 )

Net capitalized turnaround costs as of June 30

Effect of exchange rate changes and other ( 4 ) ( 7 )

Net capitalized turnaround costs as of September 30

Equity Method Investment

1 unchanged sentence

We include our share of the net earnings from this equity method investment as an element of earnings from operations because PLNL provides additional production to our operations and is integrated with our other supply chain and sales activities in the Ammonia segment.

As of June 30, 2023, the total carrying value of our equity method investment in PLNL was $ 72 million, $ 32 million more than our share of PLNL’s book value.

The excess is attributable to the purchase accounting impact of our acquisition of the investment in PLNL and reflects the revaluation of property, plant and equipment.

The increased basis for property, plant and equipment is being amortized over a remaining period of approximately 10 years.

Our equity in earnings of PLNL is different from our ownership interest in income reported by PLNL due to amortization of this basis difference.

PLNL operates an ammonia plant that relies on natural gas supplied, under a gas sales contract (the NGC Contract), by The National Gas Company of Trinidad and Tobago Limited (NGC).

The NGC Contract had an expiration date of September 2023.

In the third quarter of 2023, PLNL entered into a new gas sales contract with NGC (the New NGC Contract), which is effective October 2023 through December 2025.

In the third quarter of 2023 and due to the terms of the New NGC Contract, we assessed our investment in PLNL for impairment and determined that the carrying value of our equity method investment in PLNL exceeded its fair value.

As a result, we recorded an impairment of our equity method investment in PLNL of $ 43 million, which is reflected in equity in (losses) earnings of operating affiliate on our consolidated statements of operations for the three and nine months ended September 30, 2023.

As of September 30, 2023, the total carrying value of our equity method investment in PLNL was $ 32 million.

We have transactions in the normal course of business with PLNL reflecting our obligation to purchase 50 % of the ammonia produced by PLNL at current market prices.

Our ammonia purchases from PLNL totaled $ 36 million and $ 95 million for the three and six months ended June 30, 2023, respectively, and $ 77 million and $ 151 million for the three and six months ended June 30, 2022, respectively.

Our ammonia purchases from PLNL totaled $ 20 million and $ 115 million for the three and nine months ended September 30, 2023, respectively, and $ 61 million and $ 212 million for the three and nine months ended September 30, 2022, respectively.

CF INDUSTRIES HOLDINGS, INC.

Fair Value Measurements

Our cash and cash equivalents and other investments consist of the following:

June 30, 2023

September 30, 2023

Cost Basis Unrealized

8 unchanged sentences

Nonqualified employee benefit trusts 16 — — 16

CF INDUSTRIES HOLDINGS, INC.

December 31, 2022

15 unchanged sentences

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present assets and liabilities included in our consolidated balance sheets as of June 30, 2023 and December 31, 2022 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:

June 30, 2023

The following tables present assets and liabilities included in our consolidated balance sheets as of September 30, 2023 and December 31, 2022 that are recognized at fair value on a recurring basis, and indicate the fair value hierarchy utilized to determine such fair value:

September 30, 2023

Value Quoted Prices

6 unchanged sentences

Derivative liabilities ( 16 ) — ( 16 ) —

CF INDUSTRIES HOLDINGS, INC.

December 31, 2022

9 unchanged sentences

Cash equivalents include highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less.

As of June 30, 2023 and December 31, 2022, our cash equivalents consisted primarily of U.S.

As of September 30, 2023 and December 31, 2022, our cash equivalents consisted primarily of U.S.

and Canadian government obligations and money market mutual funds that invest in U.S.

government obligations and other investment-grade securities.

CF INDUSTRIES HOLDINGS, INC.

Nonqualified Employee Benefit Trusts

11 unchanged sentences

The carrying amount and estimated fair value of our financial instruments are as follows:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Amount Fair Value Carrying

7 unchanged sentences

that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment, when there is allocation of purchase price in an acquisition or when a new liability is being established that requires fair value measurement.

These include long-lived assets, goodwill and other intangible assets and investments in unconsolidated subsidiaries, such as equity method investments, which may be written down to fair value as a result of impairment.

These include long-lived assets, goodwill and other

CF INDUSTRIES HOLDINGS, INC.

intangible assets and investments in unconsolidated subsidiaries, such as equity method investments, which may be written down to fair value as a result of impairment.

The fair value measurements related to each of these rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets.

Since certain of the Company’s assumptions would involve inputs that are not observable, these fair values would reside within Level 3 of the fair value hierarchy.

CF INDUSTRIES HOLDINGS, INC.

For the three months ended June 30, 2023, we recorded an income tax provision of $ 134 million on pre-tax income of $ 740 million, or an effective tax rate of 18.2 %, compared to an income tax provision of $ 357 million on pre-tax income of $ 1.70 billion, or an effective tax rate of 21.1 %, for the three months ended June 30, 2022.

For the six months ended June 30, 2023, we recorded an income tax provision of $ 303 million on pre-tax income of $ 1.56 billion, or an effective tax rate of 19.5 %, compared to an income tax provision of $ 758 million on pre-tax income of $ 3.15 billion, or an effective tax rate of 24.1 %, for the six months ended June 30, 2022.

In the third quarter of 2023, we determined the carrying value of our equity method investment in PLNL exceeded its fair value and recorded an impairment of our equity method investment in PLNL of $ 43 million.

See Note 7—Equity Method Investment for additional information.

For the three months ended September 30, 2023, we recorded an income tax provision of $ 23 million on pre-tax income of $ 253 million, or an effective tax rate of 9.1 %, compared to an income tax provision of $ 155 million on pre-tax income of $ 693 million, or an effective tax rate of 22.3 %, for the three months ended September 30, 2022.

For the three months ended September 30, 2023, our income tax provision includes a $ 9 million income tax benefit arising from the finalization of tax return filing positions and adjustments to accrued withholding taxes as a result of changes reflected on our filed U.S.

federal return.

This income tax benefit in relation to pre-tax income of $ 253 million contributed to a lower effective tax rate in the third quarter of 2023 compared to the U.S.

statutory rate of 21%.

For the nine months ended September 30, 2023, we recorded an income tax provision of $ 326 million on pre-tax income of $ 1.81 billion, or an effective tax rate of 18.0 %, compared to an income tax provision of $ 913 million on pre-tax income of $ 3.84 billion, or an effective tax rate of 23.8 %, for the nine months ended September 30, 2022.

For the three and nine months ended September 30, 2022, our income tax provision includes $ 18 million of income tax expense to record a valuation allowance in the United Kingdom due to the uncertainty surrounding the realization of the deferred tax assets as a result of the impairment described in Note 5—United Kingdom Operations Restructuring.

In addition, for the nine months ended September 30, 2022, our income tax provision includes $ 22 million of income tax benefit due to share-based compensation activity and $ 78 million of income tax provision related to the Canada Revenue Agency Competent Authority Matter, as discussed below.

Our effective tax rate is impacted by earnings attributable to the noncontrolling interest in CF Industries Nitrogen, LLC (CFN), as our consolidated income tax provision does not include a tax provision on the earnings attributable to the noncontrolling interest.

Our effective tax rate for the three months ended June 30, 2023 of 18.2 %, which is based on pre-tax income of $ 740 million, including $ 79 million of earnings attributable to the noncontrolling interest, would be 2.1 percentage points higher if based on pre-tax income exclusive of the $ 79 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the three months ended June 30, 2022 of 21.1 %, which is based on pre-tax income of $ 1.70 billion, including $ 174 million of earnings attributable to the noncontrolling interest, would be 2.4 percentage points higher if based on pre-tax income exclusive of the $ 174 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the six months ended June 30, 2023 of 19.5 %, which is based on pre-tax income of $ 1.56 billion, including $ 169 million of earnings attributable to the noncontrolling interest, would be 2.3 percentage points higher if based on pre-tax income exclusive of the $ 169 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the six months ended June 30, 2022 of 24.1 %, which is based on pre-tax income of $ 3.15 billion, including $ 342 million of earnings attributable to the noncontrolling interest, would be 2.9 percentage points higher if based on pre-tax income exclusive of the $ 342 million of earnings attributable to the noncontrolling interest.

In addition, for the six months ended June 30, 2022, our income tax provision includes $ 22 million of income tax benefit due to share-based compensation activity and $ 78 million of income tax provision related to the Canada Revenue Agency Competent Authority Matter, as discussed below.

Our effective tax rate for the three months ended September 30, 2023 of 9.1 %, which is based on pre-tax income of $ 253 million, including $ 66 million of earnings attributable to the noncontrolling interest, would be 3.2 percentage points higher if based on pre-tax income exclusive of the $ 66 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the three months ended September 30, 2022 of 22.3 %, which is based on pre-tax income of $ 693 million, including $ 100 million of earnings attributable to the noncontrolling interest, would be 3.7 percentage points higher if based on pre-tax income exclusive of the $ 100 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the nine months ended September 30, 2023 of 18.0 %, which is based on pre-tax income of $ 1.81 billion, including $ 235 million of earnings attributable to the noncontrolling interest, would be 2.7 percentage points higher if based on pre-tax income exclusive of the $ 235 million of earnings attributable to the noncontrolling interest.

Our effective tax rate for the nine months ended September 30, 2022 of 23.8 %, which is based on pre-tax income of $ 3.84 billion, including $ 442 million of earnings attributable to the noncontrolling interest, would be 3.1 percentage points higher if based on pre-tax income exclusive of the $ 442 million of earnings attributable to the noncontrolling interest.

Canada Revenue Agency Competent Authority Matter

6 unchanged sentences

In March 2022, we received further details of the results of the arbitration proceedings and the settlement provisions between the United States and Canadian competent authorities, and we accepted the decision of the arbitration panel.

Under the terms of the arbitration decision, additional income for tax years 2006 through 2011 was subject to tax in Canada, resulting in our having additional Canadian tax liability for those tax years.

In the six months ended June 30, 2022, as a result of the impact of these events on our Canadian and U.S.

Under the terms of

CF INDUSTRIES HOLDINGS, INC.

the arbitration decision, additional income for tax years 2006 through 2011 was subject to tax in Canada, resulting in our having additional Canadian tax liability for those tax years.

In the nine months ended September 30, 2022, as a result of the impact of these events on our Canadian and U.S.

federal and state income taxes, we recognized an income tax provision of $ 78 million, reflecting the net impact of $ 129 million of accrued income taxes payable to Canada for tax years 2006 through 2011, partially offset by net income tax receivables of approximately $ 51 million in the United States, and we accrued net interest of $ 103 million, primarily reflecting the impact of estimated interest payable to Canada.

Of the $ 78 million of income tax provision and $ 104 million of net interest expense recognized in the six months ended June 30, 2022, $ 2 million of income tax provision and $ 5 million of net interest expense was recognized in the three months ended June 30, 2022.

Of the $ 78 million of income tax provision and $ 103 million of net interest expense recognized in the nine months ended September 30, 2022, a reduction of $ 1 million of net interest expense was recognized in the three months ended September 30, 2022.

In the second half of 2022, this tax liability and the related interest were assessed and paid, resulting in total payments of $ 224 million, which also reflect the impact of changes in foreign currency exchange rates.

1 unchanged sentence

Due primarily to the availability of additional foreign tax credits to offset in part the increased Canadian tax referenced above, the Company has filed amended tax returns in the United States to request a refund of taxes paid.

CF INDUSTRIES HOLDINGS, INC.

Transfer pricing positions

As a result of the outcome of the arbitration decision discussed above, we also evaluated our transfer pricing positions between Canada and the United States for open years 2012 and after.

Based on this evaluation, for the six months ended June 30, 2022, we recorded the following:

Based on this evaluation, we recorded the following in the nine months ended September 30, 2022:

• liabilities for unrecognized tax benefits of approximately $ 314 million, with a corresponding income tax provision, and accrued interest of approximately $ 123 million related to the liabilities for unrecognized tax benefits, and

• noncurrent income tax receivables of approximately $ 359 million, with a corresponding income tax benefit, and accrued interest income of approximately $ 33 million related to the noncurrent income tax receivables.

In the six months ended June 30, 2022, the impact on our consolidated statement of operations of the amounts recorded as a result of this evaluation of transfer pricing positions, including $ 26 million of net deferred income tax provision for other transfer pricing tax effects, was $ 19 million of income tax benefit and $ 86 million of net interest expense before tax ($ 93 million after tax).

Of the $ 19 million of income tax benefit and $ 86 million of net interest expense recognized in the six months ended June 30, 2022, $ 21 million of income tax benefit and $ 23 million of net interest expense ($ 24 million after tax) was recognized in the three months ended June 30, 2022.

In the nine months ended September 30, 2022, the impact on our consolidated statement of operations of the amounts recorded as a result of this evaluation of transfer pricing positions, including $ 29 million of net deferred income tax provision for other transfer pricing tax effects, was $ 16 million of income tax benefit and $ 90 million of net interest expense before tax ($ 98 million after tax).

Of the $ 16 million of income tax benefit and $ 90 million of net interest expense recognized in the nine months ended September 30, 2022, $ 3 million of income tax provision and $ 4 million of net interest expense ($ 5 million after tax) was recognized in the three months ended September 30, 2022.

Pension Retiree Annuity Purchase

On July 15, 2022, we entered into an agreement with an insurance company to purchase a non-participating group annuity contract and transfer approximately $ 375 million of our primary U.S.

defined benefit pension plan’s projected benefit obligation.

The transaction closed on July 22, 2022 and was funded with plan assets.

Under the transaction, the insurance company assumed responsibility for pension benefits and annuity administration for approximately 4,000 retirees or their beneficiaries.

As a result of this transaction, in the third quarter of 2022, we remeasured the plan's projected benefit obligation and plan assets and recognized a non-cash pre-tax pension settlement loss of $ 24 million, reflecting the unamortized net unrecognized postretirement benefit costs related to the settled obligations, with a corresponding offset to accumulated other comprehensive loss.

In the fourth quarter of 2022, the final settlement of the non-participating group annuity contract resulted in a refund of $ 4 million, which decreased the settlement loss by $ 3 million to $ 21 million.

CF INDUSTRIES HOLDINGS, INC.

Financing Agreements

Revolving Credit Agreement

We have a senior unsecured revolving credit agreement (the Revolving Credit Agreement), which provides for a revolving credit facility of up to $ 750 million with a maturity of December 5, 2024.

The Revolving Credit Agreement includes a letter of credit sub-limit of $ 125 million.

Borrowings under the Revolving Credit Agreement may be used for working capital, capital expenditures, acquisitions, share repurchases and other general corporate purposes.

Borrowings under the Revolving Credit Agreement may be denominated in U.S.

dollars, Canadian dollars, euros and British pounds, and bear interest at a per annum rate equal to, at our option, an applicable adjusted term Secured Overnight Financing Rate or base rate plus, in either case, a specified margin.

We are required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Revolving Credit Agreement and customary letter of credit fees.

The specified margin and the amount of the commitment fee depend on CF Holdings’ credit rating at the time.

As of June 30, 2023, we had unused borrowing capacity under the Revolving Credit Agreement of $ 750 million and no outstanding letters of credit under the Revolving Credit Agreement.

There were no borrowings outstanding under the Revolving Credit Agreement as of June 30, 2023 or December 31, 2022, or during the six months ended June 30, 2023.

The Revolving Credit Agreement contains representations and warranties and affirmative and negative covenants, including financial covenants.

As of June 30, 2023, we were in compliance with all covenants under the Revolving Credit Agreement.

Letters of Credit

In addition to the letters of credit that may be issued under the Revolving Credit Agreement, as described above, we have also entered into a bilateral agreement with capacity to issue up to $ 350 million of letters of credit.

As of June 30, 2023, approximately $ 205 million of letters of credit were outstanding under this agreement.

CF INDUSTRIES HOLDINGS, INC.

Long-term debt presented on our consolidated balance sheets as of June 30, 2023 and December 31, 2022 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate June 30, 2023 December 31, 2022

On October 26, 2023, we entered into a new senior unsecured revolving credit agreement (the New Revolving Credit Agreement), which replaced our prior senior unsecured revolving credit agreement (the Prior Revolving Credit Agreement).

See Note 18—Subsequent Event for additional information.

The Prior Revolving Credit Agreement provided for a revolving credit facility of up to $ 750 million with a maturity of December 5, 2024 and included a letter of credit sub-limit of $ 125 million.

Borrowings under the Prior Revolving Credit Agreement could be used for working capital, capital expenditures, acquisitions, share repurchases and other general corporate purposes.

Borrowings under the Prior Revolving Credit Agreement could be denominated in U.S.

dollars, Canadian dollars, euros and British pounds.

Borrowings in U.S.

dollars bore interest at a per annum rate equal to, at our option, an applicable adjusted term Secured Overnight Financing Rate or base rate plus, in either case, a specified margin.

We were required to pay an undrawn commitment fee on the undrawn portion of the commitments under the Prior Revolving Credit Agreement and customary letter of credit fees.

The specified margin and the amount of the commitment fee depended on CF Holdings’ credit rating at the time.

The Prior Revolving Credit Agreement contained representations and warranties and affirmative and negative covenants, including financial covenants.

As of September 30, 2023, we were in compliance with all covenants under the Prior Revolving Credit Agreement.

As of September 30, 2023, we had unused borrowing capacity under the Prior Revolving Credit Agreement of $ 750 million and no outstanding letters of credit under the Prior Revolving Credit Agreement.

There were no borrowings outstanding under the Prior Revolving Credit Agreement as of September 30, 2023 or December 31, 2022, or during the nine months ended September 30, 2023.

Letters of Credit Under Bilateral Agreement

We are party to a bilateral agreement providing for the issuance of up to $ 350 million of letters of credit.

As of September 30, 2023, approximately $ 200 million of letters of credit were outstanding under this agreement.

Long-term debt presented on our consolidated balance sheets as of September 30, 2023 and December 31, 2022 consisted of the following debt securities issued by CF Industries:

Effective Interest Rate September 30, 2023 December 31, 2022

Principal Carrying Amount (1)

14 unchanged sentences

(1) Carrying amount is net of unamortized debt discount and deferred debt issuance costs.

Total unamortized debt discount was $ 7 million as of both June 30, 2023 and December 31, 2022, and total deferred debt issuance costs were $ 26 million and $ 28 million as of June 30, 2023 and December 31, 2022, respectively.

Total unamortized debt discount was $ 7 million as of both September 30, 2023 and December 31, 2022, and total deferred debt issuance costs were $ 26 million and $ 28 million as of September 30, 2023 and December 31, 2022, respectively.

(2) Effective August 23, 2021, these notes are no longer secured, in accordance with the terms of the applicable indenture.

1 unchanged sentence

Under the terms of the indenture governing the 4.500 % senior secured notes due December 2026 (the 2026 Notes) identified in the table above, the 2026 Notes are guaranteed by CF Holdings.

CF INDUSTRIES HOLDINGS, INC.

Interest on the Public Senior Notes and the 2026 Notes is payable semiannually, and the Public Senior Notes and the 2026 Notes are redeemable at our option, in whole at any time or in part from time to time, at specified make-whole redemption prices.

2 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

4 unchanged sentences

Interest on tax liabilities (2)

( 2 ) 42 — 240

Interest capitalized ( 2 ) — ( 4 ) ( 1 )

3 unchanged sentences

(2) See Note 9—Income Taxes for additional information.

CF INDUSTRIES HOLDINGS, INC.

Derivative Financial Instruments

7 unchanged sentences

As a result, changes in fair value of these contracts are recognized in earnings.

As of June 30, 2023, we had natural gas derivative contracts covering certain periods through March 2024.

As of June 30, 2023, our open natural gas derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 43.8 million MMBtus of natural gas.

As of September 30, 2023, we had natural gas derivative contracts covering certain periods through March 2024.

As of September 30, 2023, our open natural gas derivative contracts consisted of natural gas fixed price swaps, basis swaps and options for 65.3 million MMBtus of natural gas.

As of December 31, 2022, we had open natural gas derivative contracts consisting of natural gas fixed price swaps, basis swaps and options for 66.3 million MMBtus of natural gas.

For the six months ended June 30, 2023, we used derivatives to cover approximately 36 % of our natural gas consumption.

For the nine months ended September 30, 2023, we used derivatives to cover approximately 27 % of our natural gas consumption.

The effect of derivatives in our consolidated statements of operations is shown in the table below.

1 unchanged sentence

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

Location 2023 2022 2023 2022

(in millions)

Unrealized net gains on natural gas derivatives Cost of sales $ — $ 17 $ 72 $ 50

Unrealized net (losses) gains on natural gas derivatives Cost of sales $ ( 7 ) $ ( 11 ) $ 65 $ 39

Realized net (losses) gains on natural gas derivatives Cost of sales ( 1 ) 12 ( 119 ) 20

Net derivative gains (losses) $ — $ 8 $ ( 46 ) $ 58

Net derivative (losses) gains $ ( 8 ) $ 1 $ ( 54 ) $ 59

CF INDUSTRIES HOLDINGS, INC.

The fair values of derivatives on our consolidated balance sheets are shown below.

As of June 30, 2023 and December 31, 2022, none of our derivative instruments were designated as hedging instruments.

As of September 30, 2023 and December 31, 2022, none of our derivative instruments were designated as hedging instruments.

See Note 8—Fair Value Measurements for additional information on derivative fair values.

Asset Derivatives Liability Derivatives

Balance Sheet Location June 30,

Balance Sheet Location September 30,

2023 December 31, 2022 Balance Sheet

Location June 30,

Location September 30,

2023 December 31, 2022

3 unchanged sentences

In the event of certain defaults or termination events, our counterparties may request early termination and net settlement of certain derivative trades or, under certain ISDA agreements, may require us to collateralize derivatives in a net liability position.

As of June 30, 2023 and December 31, 2022, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was zero and $ 73 million, respectively, which also approximates the fair value of the assets that may be needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates.

As of September 30, 2023 and December 31, 2022, the aggregate fair value of the derivative instruments with credit-risk-related contingent features in net liability positions was $ 8 million and $ 73 million, respectively, which also approximates the fair value of the assets that may be needed to settle the obligations if the credit-risk-related contingent features were triggered at the reporting dates.

The credit support documents executed in connection with certain of our ISDA agreements generally provide us and our counterparties the right to set off collateral against amounts owing under the ISDA agreements upon the occurrence of a default or a specified termination event.

As of June 30, 2023 and December 31, 2022, we had no cash collateral on deposit with counterparties for derivative contracts.

CF INDUSTRIES HOLDINGS, INC.

The following table presents amounts relevant to offsetting of our derivative assets and liabilities as of June 30, 2023 and December 31, 2022:

As of September 30, 2023 and December 31, 2022, we had no cash collateral on deposit with counterparties for derivative contracts.

The following table presents amounts relevant to offsetting of our derivative assets and liabilities as of September 30, 2023 and December 31, 2022:

Amounts presented in consolidated

3 unchanged sentences

(in millions)

June 30, 2023

September 30, 2023

Total derivative assets $ 8 $ — $ — $ 8

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We do not believe the contractually allowed netting, close-out netting or setoff of amounts owed to, or due from, the counterparties to our ISDA agreements would have a material effect on our financial position.

CF INDUSTRIES HOLDINGS, INC.

Noncontrolling Interest

11 unchanged sentences

Declaration of distributions payable ( 459 ) ( 619 )

Balance as of June 30 $ 2,716 $ 2,925

Balance as of September 30 $ 2,578 $ 2,653

Distributions payable to noncontrolling interest:

2 unchanged sentences

Distributions to noncontrolling interest ( 459 ) ( 619 )

Balance as of June 30 $ — $ —

Balance as of September 30 $ — $ —

CHS also receives deliveries pursuant to a supply agreement under which CHS has the right to purchase annually from CFN up to approximately 1.1 million tons of granular urea and 580,000 tons of UAN at market prices.

1 unchanged sentence

We are also entitled to semi-annual cash distributions from CFN.

CF INDUSTRIES HOLDINGS, INC.

a formula driven amount based primarily on the cost of natural gas used to produce the granular urea and UAN, and adjusted for the allocation of items such as operational efficiencies and overhead amounts.

On July 31, 2023, the CFN Board of Managers approved semi-annual distribution payments for the distribution period ended June 30, 2023 in accordance with CFN’s limited liability company agreement.

On July 31, 2023, CFN distributed $ 204 million to CHS for the distribution period ended June 30, 2023.

The amounts of distributions from CFN to us and CHS are based generally on the profitability of CFN and determined based on the volume of granular urea and UAN sold by CFN to us and CHS pursuant to supply agreements, less a formula driven amount based primarily on the cost of natural gas used to produce the granular urea and UAN, and adjusted for the allocation of items such as operational efficiencies and overhead amounts.

Stockholders’ Equity

4 unchanged sentences

The following table summarizes the share repurchases under the 2022 Share Repurchase Program and the 2021 Share Repurchase Program.

CF INDUSTRIES HOLDINGS, INC.

2022 Share Repurchase Program 2021 Share Repurchase Program

12 unchanged sentences

Second quarter 0.8 50 1.2 80

Third quarter 1.9 150 — —

Total shares repurchased in 2023 2.7 200 2.3 155

Shares repurchased as of June 30, 2023

Shares repurchased as of September 30, 2023

2.7 $ 200 17.2 $ 1,500

1 unchanged sentence

(1) As defined in the share repurchase programs, amounts reflect the price paid for the shares of common stock repurchased, excluding commissions paid to brokers and excise taxes.

In the six months ended June 30, 2023, we completed the 2021 Share Repurchase Program with the repurchase of approximately 2.3 million shares for $ 155 million, and we repurchased approximately 0.8 million shares under the 2022 Share Repurchase Program for $ 50 million.

In the six months ended June 30, 2022, we repurchased approximately 6.6 million shares under the 2021 Share Repurchase Program for $ 590 million, of which $ 14 million was accrued and unpaid as of June 30, 2022.

CF INDUSTRIES HOLDINGS, INC.

In the first half of 2023, we completed the 2021 Share Repurchase Program with the repurchase of approximately 2.3 million shares for $ 155 million.

In the nine months ended September 30, 2023, we repurchased approximately 2.7 million shares under the 2022 Share Repurchase Program for $ 200 million and retired approximately 3.3 million shares of repurchased stock.

We held approximately 1.9 million shares of treasury stock as of September 30, 2023.

In the nine months ended September 30, 2022, we repurchased approximately 12.7 million shares under the 2021 Share Repurchase Program for $ 1.12 billion, of which $ 27 million was accrued and unpaid as of September 30, 2022.

In the nine months ended September 30, 2022, we retired approximately 3.2 million shares of repurchased stock.

Accumulated Other Comprehensive Loss

8 unchanged sentences

Gain arising during the period — — 5 5

Reclassification to earnings — — ( 1 ) ( 1 )

Effect of exchange rate changes and deferred taxes 3 — ( 2 ) 1

Balance as of June 30, 2023 $ ( 149 ) $ 3 $ ( 53 ) $ ( 199 )

Balance as of September 30, 2023 $ ( 176 ) $ 3 $ ( 52 ) $ ( 225 )

Balance as of December 31, 2021 $ ( 141 ) $ 4 $ ( 120 ) $ ( 257 )

2 unchanged sentences

Effect of exchange rate changes and deferred taxes ( 49 ) — 7 ( 42 )

Balance as of June 30, 2022 $ ( 181 ) $ 4 $ ( 108 ) $ ( 285 )

Balance as of September 30, 2022 $ ( 190 ) $ 4 $ ( 84 ) $ ( 270 )

_______________________________________________________________________________

(1) Reclassifications out of accumulated other comprehensive loss to the consolidated statements of operations during the three and nine months ended September 30, 2022 include a non-cash pre-tax pension settlement loss of $ 24 million.

See Note 10—Pension Retiree Annuity Purchase for additional information.

CF INDUSTRIES HOLDINGS, INC.

4 unchanged sentences

Total other operating costs and expenses (consisting primarily of selling, general and administrative expenses and other operating—net) and non-operating expenses (consisting primarily of interest and income taxes) are centrally managed and are not included in the measurement of segment profitability reviewed by management.

Segment data for sales, cost of sales and gross margin for the three and six months ended June 30, 2023 and 2022 are presented in the table below.

Segment data for sales, cost of sales and gross margin for the three and nine months ended September 30, 2023 and 2022 are presented in the table below.

Ammonia Granular Urea (1)

(in millions)

Three months ended June 30, 2023

Three months ended September 30, 2023

Net sales $ 235 $ 360 $ 435 $ 114 $ 129 $ 1,273

2 unchanged sentences

Total other operating costs and expenses 97

Equity in earnings of operating affiliate 7

Equity in losses of operating affiliate (2)

Operating earnings $ 244

Three months ended June 30, 2022

Three months ended September 30, 2022

Net sales $ 531 $ 689 $ 736 $ 180 $ 185 $ 2,321

4 unchanged sentences

Operating earnings $ 750

Six months ended June 30, 2023

Nine months ended September 30, 2023

Net sales $ 1,184 $ 1,431 $ 1,650 $ 377 $ 418 $ 5,060

2 unchanged sentences

Total other operating costs and expenses 228

Equity in earnings of operating affiliate 24

Equity in losses of operating affiliate (2)

Operating earnings $ 1,804

Six months ended June 30, 2022

Nine months ended September 30, 2022

Net sales $ 2,286 $ 2,287 $ 2,727 $ 656 $ 622 $ 8,578

6 unchanged sentences

(1) The cost of the products that are upgraded into other products is transferred at cost into the upgraded product results.

(2) Total other operating costs and expenses for the three and six months ended June 30, 2022 includes $ 162 million of asset impairment and restructuring charges related to our U.K.

(2) Equity in losses of operating affiliate for the three and nine months ended September 30, 2023 include an impairment of our equity method investment in PLNL of $ 43 million.

See Note 7—Equity Method Investment for additional information.

(3) Total other operating costs and expenses for the three and nine months ended September 30, 2022 include $ 95 million and $ 257 million, respectively, of asset impairment and restructuring charges related to our U.K.

See Note 5—United Kingdom Operations Restructuring for additional information.

10 unchanged sentences

We have agreed to pay a termination fee of $ 75 million if the agreement is terminated in certain circumstances and certain regulatory approvals are not obtained.

Subsequent Event

On October 26, 2023, we entered into the New Revolving Credit Agreement, which replaced the Prior Revolving Credit Agreement that was scheduled to mature on December 5, 2024.

The New Revolving Credit Agreement provides for a revolving credit facility of up to $ 750 million with a maturity of October 26, 2028 and includes a letter of credit sub-limit of $ 125 million.

See Note 11—Financing Agreements for additional information on the Prior Revolving Credit Agreement.

CF INDUSTRIES HOLDINGS, INC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements